Wedgwood buys Doulton for £40m

TWO of Europe's oldest makers of fine china have joined forces to fight cheap imports, with Waterford Wedgwood agreeing to buy Royal Doulton for almost £40m.

Waterford Wedgwood, formed in 1986 when crystal maker Waterford bought the 250-year-old Wedgwood china business, said it would pay 12p a share in cash for Royal Doulton, whose china graced the tables of the Titanic.

That is a 43% premium to Royal Doulton's closing price on October 20, the day before Waterford, which also makes Rosenthal porcelain, said it was in talks with its loss-making rival about a possible takeover.

Both Waterford and Royal Doulton have been forced to move production to Asia in recent years as they battle with low-cost competitors from abroad and a change in consumer tastes toward cheaper crockery.

But business has remained tough, with the fall in value of the US dollar against the euro adding an extra challenge by cutting the value of sales in the US.

Hamish Grossart, chairman of Royal Doulton, which owns the Minton and Royal Albert brands, said he was delighted with the £39.9m deal.

In October, Waterford said it would pay for the deal by issuing €100m worth of new shares in a five-for-three rights issue priced at €0.06 per share.

Shares in Waterford were steady at 8 cents in morning trading. They have lost more than two thirds of their value over the past year. Royal Doulton shares were up 15% at 11.6p, closing in on Waterford's offer price.

Royal Doulton has amassed losses of almost £100m, shed 4,000 jobs and closed most of its factories over the past five years as it struggles with a long-running slump in demand. In March it said it would close its last remaining factory in the UK with the loss of 500 jobs.

'The challenge for Waterford Wedgwood will be to turn this level of operating loss into an operating profit contribution by using spare capacity in its UK plants,' said analyst Neil Clifford of Dublin-based Goodbody Stockbrokers, who rates Waterford Wedgwood stock 'reduce'.

'We expect the company to outline its plans in this regard in the coming weeks,' he added.

Royal Doulton and Wedgwood are two of the last UK manufacturers of bone china still operating in the Potteries, where an abundance of clay and coal led to a booming pottery industry in the 1700s.